Things have been tough for investors in 2022 and the S&P 500 and Nasdaq have entered into a bear market territory after three years of double-digit returns. Here’s what Jim Cramer, the host of the Mad Money show on CNBC has to say on markets after the crash.
Cramer coined the term FAANG whose constituents helped drive the markets over the last many years. However, in 2022, the FAANG pack has also looked weak and all five names are in a bear market. Netflix, which is the worst-performing FAANG stock is now banking on Squid Games to revive its fortunes.
After the U.S. Federal Reserve surprised markets with a 75 basis point rate hike, the highest since 1994, Cramer said that investors shouldn’t fight the Fed and wait for markets to stabilize before buying stocks. Notably, while U.S. stock markets spiked on Wednesday after the Fed announced the rate hike, they plummeted the next day.
U.S. stock markets have been quite volatile in 2022 unlike 2021 which was among the best years in terms of risk-adjusted returns. Alphabet was the best performing FAANG stock of 2021.
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Cramer is Not Bullish on Former Market Favorites
Cramer believes that some of the stocks which were market favorites a few quarters back have room to fall further. For instance, he believes that DocuSign is still not a buy. Cramer also finds Stich Fix uninvestable until the company’s business stabilizes. Notably, the so-called stay-at-home stocks, which include the likes of Zoom Video Communications, Peloton, and Teladoc Health have crashed badly as they are now witnessing a steep slowdown in sales growth
Cramer is meanwhile bullish on some of the bank stocks amid rising interest rates. Banks can see an expansion of their net interest margins when long-term rates rise. On the flip side, they incur losses on their bond portfolio as bond prices are inversely linked to yields. Also, if the economy crashes, banks see a rise in bad loans—just as they did in 2020.
Cramer listed Wells Fargo, Morgan Stanley, and Bank of America as the three stocks that he believes are worth buying. Notably, most analysts believe that Wells Fargo is among the best banks to play rising interest rates.
Berkshire Hathaway was the biggest stockholder in Wells Fargo before Warren Buffett started to sell the shares gradually. The “Oracle of Omaha” has now fully exited the position in Wells Fargo even as he poured billions into buying stocks in 2022. Buffett also bought more Apple stock in the first quarter of 2022 after it crashed. Berkshire is also the largest stockholder in Bank of America. Notably, while Berkshire has trimmed its stake in banking stocks over the last two years, the conglomerate added more Bank of America shares.
Cramer also advised buying the dip in oil stocks. Notably, even Buffett has invested billions into Chevron and Occidental Petroleum. Some of the other fund managers like Stanley Druckenmiller have also invested in energy stocks as Russia’s invasion of Ukraine propelled oil prices to multidecade high.
Dividend Stocks Can be a Savior as Markets Fall
Cramer also picked ten cheap stocks which are growing fast and have a good dividend yield. These are Devon Energy, ONEK, IBM, Verizon, Newell Brands, Huntington Bancshares, Advance Auto Parts, VICI Properties, Cisco, and NRG Energy. Cramer has long been a fan of Apple and his charitable trust also holds Apple stock.
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